19th Jul 2018 10:43
LONDON (Alliance News) - Babcock International Group PLC said Thursday that it expects "low single digit" adjusted annual revenue growth as its defence revenue is hit by the creation of a new submarine agency by the UK government.
Shares were trading down 11% at 713.00 pence each on the back of the news.
The engineering services company said that the UK Defence Equipment & Support organisation created a new submarine delivery agency (SDA), with this restructuring taking a "temporary" blow at the company's defence revenue.
This impact will result on "low single digit" revenue growth for the year to March 2019.
"The UK Naval business is expected to experience a temporary slowing of revenue relating to infrastructure spend, submarine disposal and the Dreadnought project as the newly-launched SDA reviews timings of their spend programme," the company said.
In the Marine division, Babcock expects a reduction in first half revenue.
"However the full year impact will be offset by new order wins in the International Naval and Technology businesses, including three energy contracts which had been delayed from the end of 2017/18," Babcock added.
Revenue expectations for the Aviation sector and Nuclear sector remained unchanged.
The company said it already booked 83% of its expected revenue for the current financial year and 55% of revenue for the year to March 2020.
"The combined order book and pipeline has increased to GBP32 billion, the order book of signed contracts remaining stable at GBP18 billion and the pipeline of bids in progress increasing to GBP14 billion, with the majority of the increase coming from new Marine opportunities," Babcock added.
The company added that it expects to achieve its underlying earnings guidance for the year, whilst continuing to reduce debt.
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